Projects & Construction Law Update - May 8 2018

Cases

Keeping your contribution claims in time

R.G. Carter Building Limited v Kier Business Services Limited [2018] EWHC 729 (TCC)

In this case, a designer was unable to avoid a contribution claim from its contractor by raising a defence that the claim was outside the applicable limitation period. The court did not accept its argument that the limitation period started running when an in principle settlement agreement was reached. In this case, the fact that the settlement negotiations were "subject to contract" meant that a formal agreement had to be entered into before time could start running.

The Civil Liability (Contribution) Act 1978 (Act) provides that any person liable in respect of any damage can recover contribution from any other person liable in respect of the same damage (s. 1(4)). It imposes a limitation period of 2 years from the date on which the right to claim contribution accrues (s. 10(1)). The right to contribution accrues from (i) the date of any judgment or award against the party seeking contribution (s. 10(3)); or (ii) upon agreement to pay compensation in the case of a settlement (s. 10(4)). In this case, the court was required to determine whether the time for seeking contribution ran from the date the parties agreed to a settlement in principle or when the parties actually entered into a subsequent binding agreement.

R.G. Carter Building Limited (R.G. Carter) engaged Kier Building Services Limited (Kier) to design a new science block for a school. Unfortunately, allegations of defective design resulted in the council (as employer) commencing arbitration proceedings against R.G. Carter. During the course of the arbitration, the council and R.G. Carter engaged in settlement discussions. On 16 April 2015, they agreed in principle and "subject to contract" that R.G. Carter would carry out the remedial works at its own cost. However, a formal settlement agreement was not signed until 29 June 2015. Later, on 28 April 2017, Kier and R.G. Carter entered into a standstill agreement.

R.G. Carter sought contribution from Kier for the cost of the remedial works and issued proceedings on 20 September 2017. Kier argued that, in light of the 2-year limitation period specified in the Act, the action for contribution was already time-barred by the time the stand-still agreement was entered into. Its position was that the limitation period started running on 16 April 2015, when the council and R.G. Carter agreed their settlement in principle, and therefore any contribution claim was time-barred by 16 April 2017 and before the standstill agreement was executed.

The basis for Kier's argument was that:

the language of s. 10(4) does not suggest a binding agreement is required; policy considerations point to time running from the earliest date possible (to prevent the litigation of stale claims); and it is only the amount of compensation that must be agreed to satisfy s. 10(4), the fact that other ancillary terms are yet to be agreed will not prevent time from running. The court disagreed with Kier's position. Under Kier's construction, if time began running from an agreement made in principle and 'subject to contract', but talks...